Blue Chips Swing to a Cypriot Tune

The Dow industrials ended modestly higher as news out of Europe whipsawed stocks amid worries about the Cyprus bank bailout.

The Dow Jones Industrial Average closed up 3.76 points, less than 0.1%, to 14455.82. At its morning highs, it had gained more than 60 points; at its afternoon lows, it had lost more than 60.

The Standard & Poor's 500-stock index declined 3.76 points, or 0.2%, to 1548.34. That marked the first time this year that the S&P 500 has fallen three consecutive days. The Nasdaq Composite Index retreated 8.50 points, or 0.3%, to 3229.10.

Related Video

MarketWatch's Laura Mandaro looks at Billionaire David Einhorn's top stock picks as of December 2012. (Photo: AP/Getty Images)

How do you find the next Cyprus? One quick way is to look at banking assets relative to gross domestic product. MarketWatch's Jim Jelter discusses countries that are most exposed to their banks. (Photo: Getty Images)

Driving U.S. stocks to and fro was the latest news out of Cyprus, where the country's Parliament voted Tuesday against a proposed bank-deposit levy, part of a bill meant to secure a bailout of the country's financial system.

As details of the plan emerged over the weekend, investors worried that the unprecedented move to reach into depositors' accounts would spook bank depositors in other weak euro-zone countries, further crimping the area's financial system.

Stocks dove in afternoon trading on news that the Cypriot Parliament had rejected the plan but then recovered later in the day as the European Central Bank signaled it would provide support for troubled banks in the country.

For investors, the question in part was over which was worse: continued uncertainty or a plan that set a precedent that unnerved many in the financial markets.

"Reaction certainly would have been greater if the levy had passed, but seeing that it hasn't, there's still no plan B, and that's of a greater concern going forward," said Jay Wong, portfolio manager with Payden & Rygel, which oversees $80 billion in assets.

For now, investors were able to take solace in signs that the problem in Cyprus was contained and not spreading to other European financial markets.

Stocks pared the worst of the session's losses in late trading after a day of being whipsawed by the latest developments from Europe's debt crisis. Matt Jarzemsky reports. Photo: AP.

"We're watching very closely, but at present we don't think Cyprus is a game-changer in Europe," said Stephen Wood, chief market strategist at Russell Investments, which oversees $163 billion in assets. "We're looking at financial-system indicators in Italy, Spain, Portugal, Greece and also bank data to see if there's a run or even a jog on banks in those countries. We don't see that just yet."

Some said the softness that U.S. stocks did suffer reflected a market that was overdue for a pullback after weeks of gains that took the Dow into record territory.

In a reversal of early trading, the dollar gained against the euro but fell versus the yen. Crude-oil prices sank 1.7%, to settle at $92.16 a barrel, while gold added 0.4%, to $1,611.30 a troy ounce. The 10-year Treasury note gained in price as traders sought haven assets, pushing its yield down to 1.908%.

This copy is for your personal, non-commercial use only. Distribution and use of this material are governed by our Subscriber Agreement and by copyright law. For non-personal use or to order multiple copies, please contact Dow Jones Reprints at 1-800-843-0008 or visit www.djreprints.com.